INSIGHT: Lost chemistry pinpoints industry change

05 March 2007 17:45  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--The $60.6bn of domestic chemicals sales and trade opportunities lost to US manufacturers over the past 10 years is hardly trivial.

It reflects the rising importance of China as the world’s manufacturing powerhouse and the impact on global markets of chemicals producers from India and elsewhere in Asia.

The increased level of global trade in chemicals may be helping to drive sector growth but it is also helping to shift its power base out of North America and Europe.

Chemicals business lost as trade patterns in key downstream industries have changed has been equivalent to 5.4% of chemical industry shipments since 1997, the American Chemistry Council (ACC) calculated in its latest “lost chemistry” analysis.

Over the same period – between 1997 and 2006 – the direct loss in business from a declining (chemicals) trade balance was $26.5bn, or 4.2% of industry shipments. Remember, the US chemicals trade balance dipped negative for the first time in 2002 and has stayed that way since.

A negative pharmaceuticals trade balance has been the most important contributory factor but the trade balances in inorganics, fine chemicals and specialities have also been negative.

Because of the declining trade balance in vitally important customer segments for the industry – like the oil & gas business, textiles, leather goods, electrical appliances and manufacturing industry generally – petrochemicals producers have lost business to the value of $18.4bn, the ACC estimated.

Lost polymers business amounted to $8.8bn over the ten year period.

The ACC analysis is one way of looking at the de-industrialisation of the US economy and of the impact of that de-industrialisation on the sector.

Among the key customer industries for chemicals, apparel currently represents the largest “lost chemistry” position followed by computers and electronics, transportation equipment (largely light vehicles, textile mill products, leather goods (mostly footwear), plastics and rubber products and miscellaneous manufacturing.

The ACC noted that the deteriorating trade balance for plastic and rubber products was particularly pronounced. It involved a swing from a $271m net export of chemistry position to a deficit or lost chemistry position of $3.3bn.

This downstream segment is a big user of chemicals from plastic resins and synthetic rubber to flame retardants, carbon black and various rubber processing chemicals.

And it is not surprising that the plastics and rubber trade with China stands out as a major contributory factor to the shifting chemicals trade balances.

The US has historically maintained a net trade deficit with China in plastic and rubber products but the further negative swing has been one of the greatest since 1997.

Increasing amounts of lost chemistry has occurred though rising imports of plastic bags and rubber hoses, the Council says.

China’s $14.4bn net gain accounted for 42% of the total $34.1bn in cumulative lost chemistry since 1997.

By: Nigel Davis
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